Amazon.com to buy Kiva Systems for 487 million pounds

A box from Amazon.com is pictured on the porch of a house in Golden, Colorado July 23, 2008.

Reuters/Rick Wilking

(Reuters) - Amazon.com Inc (AMZN.O) said on Monday it agreed to buy Kiva Systems Inc for $775 million (487 million pounds) in cash, a deal that will bring more robotic technology to the e-commerce company's giant network of warehouses.

The acquisition, which has been approved by Kiva's stockholders, is expected to close in the second quarter of 2012, Amazon added in a statement.

Kiva develops robots that zip around warehouses, grabbing and moving shelves and crates full of products. The technology helps retailers fulfil online orders quickly and with fewer workers. Companies including Gap Inc (GPS.N), Staples Inc (SPLS.O) and Crate & Barrel, have used the technology.

Amazon has traditionally used more employees in its warehouses, or fulfilment centers as they are known. However, Kiva's robots have been used by other e-commerce companies acquired by Amazon in recent years, such as Quidsi and Zappos.

"This is a way to improve efficiency," said Scott Tilghman, an analyst at Caris & Company. "Given the scale of Amazon's operations, it makes sense to have this capability in house."

Fulfilment centers are crucial to Amazon's main online retail business. But the company also offers fulfillment services to other merchants, making the warehouses even more important.

"Amazon has long used automation in its fulfillment centers, and Kiva's technology is another way to improve productivity by bringing the products directly to employees to pick, pack and stow," said Dave Clark, vice president, global customer fulfillment, at Amazon.com.

Amazon has been spending more on fulfillment in recent years as the company opened lots of new warehouses to handle the rapid growth of its business.

Fulfillment costs as a percentage of revenue rose to more than 9 percent in 2011, from just over 8 percent in 2010, according to Aaron Kessler, an analyst at Raymond James.

"That's been a big focus for investors recently," Kessler said. "It's a big cost. They are shipping so much and increasing volume so they need to figure out how to get more leverage out of these fulfillment centers."